Court upholds arbitration award for US$306 million

06/10/17

UMS Holding Limited v Great Station Properties [2017] EWHC 2398 (Comm)

The Commercial Court has upheld an LCIA arbitration award for US$306 million, and considered the boundaries of a challenge to an arbitral award under section 68 of the Arbitration Act 1996.

In May 2016, an LCIA arbitral tribunal ordered a group of companies owned by the businessman Konstantin Grigorishin (the “Grigorishin Respondents”) to pay US$306 million to a group of companies owned by the businessman Vladimir Lukyanenko (“Great Station”).  The underlying dispute arose from the breakdown of a joint venture between the Grigorishin Respondents and Great Station, which was concerned with the manufacture of gas compressors.

Great Station made claims against the Grigorishin Respondents under an option agreement and in respect of an illicit scheme whereby the Grigorishin Respondents covertly diverted profits away from the joint venture. The tribunal found for Great Station. 

The Grigorishin Respondents challenged the award under section 68 of the Arbitration Act 1996, alleging a large number of serious irregularities in the award. They said that the tribunal had made findings which had ignored or failed to take account of the countervailing evidence adduced by the Grigorishin Respondents which was allegedly essential to the issues in the arbitration, and had done so in so many respects that this was an exceptional case for relief under section 68. The tribunal had consisted of two former Commercial Court judges and a distinguished arbitrator, and the Grigorishin Respondents suggested that in those circumstances the Court should hold a tribunal so made up to a higher standard when it considered the award’s reasoning than might otherwise be the case. 

Teare J heard the challenge over four days and dismissed it on all grounds.  His judgment considers the limits of a section 68 challenge, including the extent to which a tribunal needs to gives reasons when it decides issues in an arbitration.  He noted that the assessment and evaluation of the evidence is a matter exclusively for a tribunal, and that it was impermissible for the Court to undertake that exercise in a section 68 challenge. The Judge held that a failure by a tribunal to refer to evidence could not amount to a serious irregularity, and considered that alleged illogicality or irrationality in an award were not by themselves a form of serious irregularity such as to ground relief under section 68. He further noted that a tribunal could discharge its duty to deal with the essential issues and give reasons in a way which was different from the current practice of the courts when writing judgments: the parties had chosen to arbitrate, not litigate.

The judgment is here.